The National Audit Office (NAO), which is responsible for scrutinising the value for money of public spending in the United Kingdom, has described the government’s national £1.2bn superfast broadband roll-out scheme as “moving forward late“, lacking “strong competition to protect public value” and being underfunded.

The Broadband Delivery UK (BDUK) office was originally established to help the final 33% of the country gain access to a fixed line superfast broadband (25Mbps+) service, which private sector ISPs (e.g. BT) had found to be economically unviable for upgrade. It first aimed to do this by using a mix of public (£530m budget) and private match funding.

BDUK’s initial aim was to expand the reach of such networks to 90% of the country by the end of 2015 (the last 10% were promised internet download speeds of at least 2Mbps). But last week the word “nearly” was added in front of the 90% target (i.e. it’s expected to slip into 2016) and an extra £250m was set aside to push the end goal out to 95% by 2017 (here).

Unfortunately the process has faced heavy criticism for a variety of reasons including general administrative delays / costs (a lot of the money has gone on paper work), a lack of competition (BT are left as the only viable bidder), EU funding delays (here), legal challenges (here) and infrastructure costs (here). Little wonder that the Major Projects Authority recently warned that the “successful delivery of the project is in doubt” (here). Now the NAO has joined the party with another scathing attack on the already beleaguered scheme.

Amyas Morse, Head of the National Audit Office, said:

“The rural broadband project is moving forward late and without the benefit of strong competition to protect public value. For this we will have to rely on the Department’s active use of the controls it has negotiated and strong supervision by Ofcom.”

The report claims that BDUK, despite recently beginning to help put BT’s shovels in the ground (albeit only for a small number of projects), is currently “expected to be delivered nearly two years later than initially planned” (i.e. 22 months).

It further expects that only 9 of the related 44 Local Broadband Plans (LBP) for each local authority will reach the government’s original target of providing 90% superfast coverage by “May 2015“. Apparently the government now expects to meet the 90% target by December 2016, which is partly attributed to the 6 month delay in gaining approval for the project under EU State aid rules.

The NAO also attacked BDUK’s lack of competition and noted, as we have done many times before, that it’s structure effectively caused most of the participants to quit; leaving BT as the only viable bidder. But there’s also a concern about the transparency of costs, or lack thereof, for BT’s effort.

NAO Report Statement

“The Department has secured only limited transparency over the costs in BT’s bids. It does not have strong assurance that costs, take-up assumptions and the extent of contingency contained in BT’s bids are reasonable.”

Finally the NAO also notes that the funding contributed by BT has, so far, been “lower than originally modelled“. As a result BT are now expected to provide just 23% of the overall £1.5bn in “projected funding” (£207m less than was modelled in 2011). However the report added that, by the end of the programme, BT are still likely to have benefited from £1.2 billion of public money.

On the other hand we think it’s a little early to be certain of this (the NAO report was written at a time when only about a third of the contracts had been signed) and BT has repeatedly confirmed that it’s set aside an additional £1bn to match-fund against BDUK contributions. Never the less it’s something to keep tabs on.

Recommendations

The NAO has now told the government to “identify all the reasons for the slippage“, investigate the cost concerns, improve its monitoring of the process, ensure greater transparency and work with BT to rectify all of these elements. Curiously the word “competition” only gets mentioned once in the recommendations section, which is alongside the call for a “sufficiently high standard of financial transparency“.

In the meantime the government last week confirmed, partly due to its anticipation of today’s report, that BDUK would need to be restructured and given greater “operational freedom and an enhanced delivery focus, and will be equipped with the commercial skills it needs to deliver a broadband programme” (here and here). It remains to be seen whether any of this will prove to be effective but we have to hope.

Meanwhile BT defended its position by saying that there was “strong competition when prices were set at the start of the process” and that everybody else only dropped out because “deploying fibre broadband is an expensive long-term business“. Indeed it is, although requiring ISPs to have a minimum turnover of £20m and limiting related solutions like Physical Infrastructure Access (PIA) to only residential services didn’t help.

The next bunch to take a pop at BDUK and BT will probably be the Public Accounts Committee (PAC), which will no doubt use this report as fuel for its fire.

The Department for Culture, Media and Sport (DCMS) has now given us a statement, which confirmed that they expect 88% of the UK to get superfast broadband by the end of 2015. In fairness that’s not too wide of the mark, especially for such a complicated scheme.

A DCMS Spokesman told ISPreview.co.uk:

Government is delivering a transformation in broadband and already 100,000 more homes and businesses are getting access to superfast broadband each week. Around 88 per cent of the country will have access to superfast broadband by December 2015, with an estimated 90 per cent getting [fixed line] superfast coverage by early 2016.”

All fair points – the devil is always in the detail; and a reminder (again) that complex contracts and textbook contracting methodologies aren’t a magic wand to deliver the best result and guarantee VFM. (Remember PFI?)

But how else should the government have spent its £530m? Isn’t that the basic problem? And, perhaps, the politics.

There is no transparency in this at all. They hand over BT a wedge of money to enable areas and there is no real idea of the costs.

With a 2 year delay quote a few of the BDUK areas should have moved to economic as average take up increases

A more sensible approach would have been to get BT to declare the minimum number of subscribers they needed on a cabinet. BDUKL then just covers the difference between actual number and economic number. BDUK then just funds the difference. It should then be reviewed every quarter so as the numbers on the cabinet increase the BDUK subsidy reduces

The BDUK project was a crap right from the start and this was what quite a few people on here were saying, for a start they just as well have handed all the money to BT from the start and as for blaming the EU there’s no surprise there I wondered when we were going to hear that chestnut just get over it and get going with the project. Here In Somerset all they have announced so far is a few small areas how they will get it done on time is beyond me, they will certainly have to step it up a gear.

Given Jeremy Hunt’s willingness to hide behind figures given by BT on the Today programme this morning, I’m not too optimistic that the government will be holding BT to account or shining any light on the murky BDUK dealings.

It was clear from very early on that the BDUK project was fast falling behind schedule. I would expect it to continue to fall behind but at a slower rate

Putting it all to BT was a very strange decision. Most companies with very large project like this would split the business between two suppliers just to ensure security of supply and to ensure you have an alternative supplier should one hit problems, A probable mix would have been 70% with the lowest cost compliant supplier & 30% with the next lowest cost compliant supplier